Biogen(US:BIIB)2024-08-01 20:11PART I — FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents the company's unaudited condensed consolidated financial statements for the periods ended June 30, 2024, and 2023 Condensed Consolidated Statements of Income Highlights (in millions, except per share data) | Metric | Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $2,464.9 | $2,456.0 | $4,755.4 | $4,919.0 | | Net Income | $583.6 | $593.3 | $977.0 | $980.9 | | Diluted EPS | $4.00 | $4.07 | $6.70 | $6.74 | Condensed Consolidated Balance Sheets Highlights (in millions) | Metric | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $7,108.5 | $6,859.3 | | Total Assets | $26,804.1 | $26,844.8 | | Total Current Liabilities | $3,108.2 | $3,434.3 | | Total Liabilities | $10,915.0 | $12,045.4 | | Total Equity | $15,889.1 | $14,799.4 | Condensed Consolidated Statements of Cash Flow Highlights (in millions) | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash flow from operating activities | $1,179.0 | $942.3 | | Net cash flow from investing activities | $400.5 | $(1,706.5) | | Net cash flow from financing activities | $(684.8) | $(53.2) | Notes to Condensed Consolidated Financial Statements - Biogen completed the acquisition of Reata Pharmaceuticals on September 26, 2023, for approximately $7.2 billion, acquiring SKYCLARYS, the first approved treatment for Friedreich's Ataxia4850 - On July 2, 2024, Biogen completed the acquisition of HI-Bio for an upfront payment of $1.15 billion, plus potential milestones, to augment its immunology pipeline with the lead asset felzartamab62 - In April 2024, the company sold a rare pediatric disease Priority Review Voucher (PRV) for $103.0 million, recognizing a net gain of $88.6 million64 - The "Fit for Growth" restructuring program, initiated in July 2023, is expected to generate approximately $1.0 billion in gross operating expense savings by the end of 202567 - The $1.0 billion term loan drawn for the Reata acquisition was fully repaid as of June 30, 2024134 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes financial performance for Q2 and H1 2024, covering revenue trends, cost initiatives, and strategic acquisitions Results of Operations Revenue by Segment - Q2 2024 vs Q2 2023 (in millions) | Segment | Q2 2024 | Q2 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Multiple Sclerosis | $1,149.8 | $1,209.3 | $(59.5) | (4.9)% | | Rare Disease | $534.1 | $438.0 | $96.1 | 21.9% | | Biosimilars | $198.1 | $195.1 | $3.0 | 1.5% | | Anti-CD20 Programs | $444.5 | $433.4 | $11.1 | 2.6% | | Contract Mfg, Royalty & Other | $120.8 | $176.8 | $(56.0) | (31.7)% | | Total Revenue | $2,464.9 | $2,456.0 | $8.9 | 0.4% | - The 4.9% decrease in Multiple Sclerosis revenue in Q2 2024 was primarily driven by competition impacting TYSABRI and declining demand for Interferons as patients switch to higher-efficacy therapies250 - Rare Disease revenue grew 21.9% in Q2 2024, largely due to $100.0 million in global revenue from SKYCLARYS, which was acquired in the Reata transaction253 Cost and Expense Highlights - Q2 2024 vs Q2 2023 (in millions) | Expense Line | Q2 2024 | Q2 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Cost of Sales | $546.0 | $592.7 | $(46.7) | (7.9)% | | Research & Development | $513.9 | $584.2 | $(70.3) | (12.0)% | | Selling, General & Administrative | $553.8 | $548.0 | $5.8 | 1.1% | | Total Cost and Expense | $1,766.2 | $1,747.9 | $18.3 | 1.0% | - Research and Development expense decreased by 12.0% in Q2 2024, primarily due to cost-reduction measures from portfolio prioritization and the 'Fit for Growth' program284 - Selling, General and Administrative expense increased by 1.1% in Q2 2024, driven by higher spending to support the launches of LEQEMBI and SKYCLARYS288 Financial Condition, Liquidity and Capital Resources - Cash and cash equivalents increased to $1.91 billion as of June 30, 2024, from $1.05 billion at December 31, 2023304311 - The company generated $1.18 billion in net cash flow from operations during the first six months of 2024, an increase of 25.1% from the prior year period313316 - Key cash inflows in H1 2024 included the final $437.5 million payment from Samsung BioLogics for the Bioepis sale and $103.0 million from a PRV sale, while key outflows included $650.0 million for debt repayment311317318 - In July 2024, the company used available cash on hand to fund the $1.15 billion acquisition of HI-Bio305 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign currency, credit, and equity prices, using hedging to mitigate foreign exchange impacts - The company's primary market risks are foreign currency exchange, credit risk, and equity price risk333 - A hypothetical 10% adverse movement in foreign currency exchange rates would result in a decrease of approximately $256.2 million in the fair value of outstanding forward contracts as of June 30, 2024337 - A hypothetical 10% adverse movement in equity prices would decrease the fair value of the company's strategic investment portfolio by approximately $30.3 million as of June 30, 2024339 Item 4. Controls and Procedures Management concluded its disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal controls - Management concluded that disclosure controls and procedures were effective as of the end of the period covered by the report (June 30, 2024)341 - There were no changes in internal control over financial reporting during the quarter ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, internal controls344 PART II — OTHER INFORMATION Item 1. Legal Proceedings This section references Note 21 for details on ongoing legal matters, including litigation, patent disputes, and government investigations - Details on legal proceedings are provided in Note 21 of the condensed consolidated financial statements346 Item 1A. Risk Factors The company faces significant risks from product concentration, competition, pricing pressures, and the execution of strategic initiatives - The company is substantially dependent on revenue from its products, which face increasing competition from generics, biosimilars, and new originator therapies347 - Long-term success depends on the successful development of new products and additional indications, a process that is expensive and highly uncertain347 - Risks exist in executing strategic initiatives, including realizing anticipated benefits from the Reata and HI-Bio acquisitions and achieving savings from the 'Fit for Growth' program351 - Sales are subject to intense pressure on pricing and reimbursement from third-party payors and government bodies, including potential impacts from the Inflation Reduction Act (IRA)351353 - Manufacturing is complex and subject to risks, including reliance on third-party and single-source suppliers, which could lead to supply disruptions367 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No common stock was repurchased in Q2 2024, with approximately $2.1 billion remaining available under the current repurchase program - There were no share repurchases of common stock during the three and six months ended June 30, 2024391 - Approximately $2.1 billion remained available under the 2020 Share Repurchase Program as of June 30, 2024391 Item 5. Other Information No directors or officers entered into or terminated any Rule 10b5-1 trading arrangements during the second quarter of 2024 - No trading arrangements for the purchase or sale of Biogen securities were entered into or terminated by Directors or Officers during Q2 2024392 Item 6. Exhibits This section lists exhibits filed with the report, including corporate governance documents and required Sarbanes-Oxley certifications - The report includes various exhibits, such as the Biogen Inc. 2024 Omnibus Equity Plan and certifications from the CEO and CFO395